Unlocking Nft Investment: Strategies Beyond Buying

There are several ways to invest in NFTs without actually buying one. For instance, you can invest in ERC-20 tokens, which can represent utility tokens and governance tokens. You can also buy fractions of NFTs, invest in NFT index funds, or lend crypto to NFT users. Another option is to use your current skills to make money in the NFT market. For example, if you can craft, draw, design, or build, you can start a business that turns a person's digital NFT into a physical item.

Invest in ERC-20 tokens

ERC-20 tokens are the technical standard for fungible tokens created using the Ethereum blockchain. A fungible token is one that is exchangeable with another token. ERC-20 tokens are a representation of an asset, right, ownership, access, cryptocurrency, or anything else that is not unique in and of itself but can be transferred.

ERC-20 allows developers to create smart-contract-enabled tokens that can be used with other products and services. These tokens are interchangeable with other smart contract tokens.

Ether (ETH) is the native token used by the Ethereum blockchain and network as an internal payment system. ERC-20 tokens are created using the Ethereum blockchain but are not the same as Ether. While ETH is used to pay for computations and network resources, ERC-20 tokens can be created to represent any real-world or virtual asset.

ERC-20 tokens are created by developers using a list of functions and events that must be implemented into the token to be considered ERC-20 compliant. These functions describe what must be included in the smart-contract-enabled token, while events describe an action. The functions a token must have are:

• TotalSupply: The total number of tokens that will ever be issued
• BalanceOf: The account balance of a token owner's account
• Transfer: Automatically executes transfers of a specified number of tokens to a specified address
• TransferFrom: Automatically executes transfers of a specified number of tokens from a specified address
• Approve: Allows a spender to withdraw a set number of tokens from a specified account, up to a specific amount
• Allowance: Returns a set number of tokens from a spender to the owner

The events that must be included in the token are:

• Transfer: An event triggered when a transfer is successful
• Approval: A log of an approved event

Some popular examples of ERC-20 tokens include:

• DAI Stablecoin (DAI)
• ChainLink Token (LINK)
• Wrapped TON Coin (TONCOIN)
• Lido DAO Token (LDO)
• Axie Infinity Shard (AXS)

Buy fractions of NFTs

NFTs are a speculative asset, and the safest option is to invest in blue-chip projects. However, these can be very expensive. For example, a CryptoPunk NFT can cost over $115,000, and a BAYC can cost about $34,000. Fractionalised NFTs offer a more affordable way to invest in top projects, allowing you to spend just a few dollars.

Fractionalisation is the process of splitting an NFT into a number of ERC-20 tokens, making NFTs a liquid asset with collective ownership. Several platforms, including NIFTEX and Metapurse, allow users to fractionalise NFTs. You can then invest in these fractional NFTs on a decentralised exchange (DEX) like Uniswap. This means that you can invest in a CryptoPunk with as little as $10!

It's important to note that not all NFT projects are created equal. Some projects sell NFTs without the actual creative or ownership rights of the digital asset. As with any purchase, it's crucial to thoroughly research a potential investment so you know exactly what you're buying. NFT marketplaces offer terms and conditions, including a license that applies to NFTs purchased on their site, and these can vary. The NFT license agreement is the most important thing that determines an NFT buyer's rights, so be sure to read it before buying.

Invest in NFT index funds

Index funds are a low-cost, easy way to build wealth. They are a group of stocks that mirror the performance of an existing stock market index, such as the Standard & Poor's 500 index. Index funds don't try to beat the market but instead try to be the market by buying stocks of every firm listed on a market index. This makes them a passive management strategy, and they are often used to balance the risk in an investor's portfolio.

NFT Index Funds

NFT index funds are a way to gain exposure to the NFT market without having to purchase individual NFTs. These funds typically track the performance of a group of NFT assets or collections. Here are some options for investing in NFT index funds:

NFTX

NFTX is a platform for creating NFT-backed index funds. It offers single fund tokens and combined fund tokens. Single fund tokens provide exposure to a specific type of asset within an NFT asset class, while combined fund tokens offer exposure to a range of assets within an asset class. For example, one of NFTX's single fund tokens is $PUNK-BASIC, which is backed 1:1 with average CryptoPunks and tracks the floor price of these NFTs. To invest in NFTX, you will need to have some ETH ready and follow these steps:

• Head to the NFTX gallery and click on your desired collection and token.
• Click on the "Buy Token" button on the right side of the dashboard.
• You will be directed to the SushiSwap liquidity pool, where you can connect your wallet and buy/sell your desired index.

NIFTEX

NIFTEX is a service that allows you to invest in NFT fractions, also known as shards. It offers the ability to create both single NFT fractions and baskets of fractions. NIFTEX recently launched NIFTEX V2, which includes lower gas prices and the ability to include fees from secondary market trading that go back to the NFT artist. To invest in NIFTEX, you can follow these steps:

• Go to the NIFTEX website and find the NFT fractions or baskets of fractions you want to invest in.
• Purchase the ERC-20 tokens representing the NFT fractions.
• You can then trade these tokens on decentralised exchanges (DEXs).

Bitwise Blue-Chip NFT Index Fund

The Bitwise Blue-Chip NFT Index Fund is another option for gaining exposure to the NFT market. This fund seeks to track an index of the most valuable and well-established NFT collections in the arts and collectibles sector, based on market capitalisation. The fund is currently limited to accredited investors, with a $25,000 minimum investment.

PieDAO's PLAY Metaverse NFT Index

PieDAO's PLAY Metaverse NFT Index is an NFT index fund that provides broad exposure to the NFT market. It is a token that gives you access to a number of NFT protocol governance tokens. You can purchase this token on decentralised exchanges (DEXs).

Lend crypto to NFT users

If you're looking to invest in NFTs without buying them, one option is to lend crypto to NFT users. This can be done through NFT lending platforms, which facilitate peer-to-peer lending or peer-to-protocol lending. These platforms allow NFT owners to use their NFTs as collateral to borrow crypto from lenders. The NFT is typically placed in a secure escrow smart contract during the loan period, and the owner gets their NFT back after repaying the loan.

One popular peer-to-peer NFT lending platform is NFTfi, which allows NFT holders to borrow cryptocurrency by using their NFTs as collateral. NFTfi has no fees for borrowers and charges lenders a 5% fee on the interest earned on successful loans. Another peer-to-peer lending platform is Arcade, which allows users to wrap multiple NFTs into one, which can then be collateralized as a single asset.

In the peer-to-protocol lending model, NFT owners can borrow directly from the protocol by collateralizing their NFTs in a smart contract-powered digital vault. BendDAO and Pine are popular platforms that follow this model.

When considering lending crypto to NFT users, it is important to remember that financial investments in NFTs and decentralized finance (DeFi) come with risks, including sudden downturns in the cryptocurrency market and regulatory crackdowns.

Buy ETH

To buy ETH, you will need to use a cryptocurrency exchange platform such as Coinbase, MoonPay, or BitPay. Here is a step-by-step guide on how to buy ETH using these platforms:

Coinbase:

• Create a Coinbase account by downloading the Coinbase app and signing up. You will need a valid ID, and you may be asked for proof of address.
• Add a payment method, such as a bank account, debit card, or wire transfer.
• On Coinbase.com, select "Buy & Sell". On the Coinbase mobile app, tap the "+" or "Buy" button on the Home tab.
• Select Ethereum from the list of assets by searching for it in the search bar.
• Enter the amount you want to buy in your local currency, which will be automatically converted into ETH.
• Finalize your purchase by previewing the details and confirming.

MoonPay:

• Enter the amount of ETH or fiat currency you wish to purchase.
• Enter your ETH wallet address or create a MoonPay account.
• Verify your email and basic information.
• Choose your preferred payment method, such as a credit card, debit card, bank transfer, Apple Pay, or Google Pay.
• Store your purchased ETH in your preferred wallet, such as Ledger, MetaMask, Exodus, or Trust Wallet.

BitPay:

BitPay allows you to buy ETH instantly by downloading the app and following the instructions.

It is important to remember that purchasing any cryptocurrency, including ETH, carries certain risks. Always do your own research and consider factors such as token price, market cap, supply, and your individual risk appetite before investing.

Frequently asked questions